Evolution fights fine threat

STOCKBROKER Evolution Beeson Gregory is fighting the threat of a £500,000 fine as the Financial Services Authority's 10-month-long probe into short selling of shares in Room Service Group nears its conclusion.

The broker has been arguing its case vigorously. Lawyers say the firm could face a £400,000 fine and one of its senior market makers a £100,000 penalty.

But it has marshalled powerful arguments in its defence and could, if necessary, take the case to an independent tribunal.

The FSA began its investigation in December after Room Service's shares were suspended following the collapse of a rights issue to cut its £219,000 debts.

Angry investors claimed that 'short sellers' had sold more than its entire share capital and have launched county court claims against up to eight broking firms.

Richard Griffiths, chairman of Evolution, refused to comment. The FSA also refused to comment.

Evolution, where former Tesco boss Lord MacLaurin recently joined the board, has seen its shares almost double in the past year to 150p, valuing it at £374m.

Those at the centre of its probe argue short selling is legitimate. One of the issues is that Room Service's market value was so tiny it could have been swamped by any heavy trading.

Market makers argue they were acting on known information and were right about its problems.